World Trade: Hurdles to Clear

The World Bank's Global Economic Prospects and Developing Countries 2001, recently released, lists factors likely to cloud the trade prospects of developing countries and outlines measures to enable developing nations to benefit from integration into the global economy. The impact of technological innovations and the dismantling of trade barriers are important subjects discussed in the report. Developing nations are a varied lot with differing interests on trade issues, but on some they can find common ground. What the report has to say on these aspects should interest India and other developing countries in the context of the agenda of global trade talks.

One important area is agriculture, negotiations on which are set to take place in spite of the failure to launch a new round of trade talks in the WTO. According to the present timetable, countries are to submit proposals on agriculture by this month-end and talks are expected to begin next March. Evidence provided in the report of protectionism in the advanced countries in agriculture and its impact on the developing countries strengthen the latter's effort for reduction of trade barriers that hinder their export growth. The discussion in the report on 'Protection in Industrial Countries' confirms that import restrictions and subsidies in the developed countries form a major obstacle to the growth of developing countries. The focus is specifically on the EU, the US, Japan and Canada and the report notes that although average nominal tariffs in these so-called QUAD countries range from 4.3 per cent in Japan to 8.3 per cent in Canada, their tariffs and trade barriers remain much stiffer on many products imported from the developing countries. For example, on major staple food products, tariff rates frequently exceed 100 per cent, and on textiles, clothing and footwear they are in the 15-30 per cent range. In a few cases they go as high as 550 per cent. The report points out that tariffs are particularly high on products in which the developing countries have a comparative advantage. For instance, in 1999 $ 26 billion worth of exports from the developing countries comprised products with tariffs above 50 per cent in the QUAD countries. Agricultural subsidies by industrialised countries, of course, form a major barrier to the developing countries' exports. The report points out that over the past few years when agricultural prices have declined, subsidies have been raised. Overall, the share of developing country agricultural exports in world markets has declined and this is significantly attributable to the developed countries' tariffs and subsidies.